Most Millionaires Say They Need $3 Million To Feel Wealthy

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    NEW YORK (AP) – Is it possible to be a millionaire without being considered rich? New research suggests most millionaires don’t feel more financially secure than the rest of us.

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    Once viewed as the ultimate milestone in wealth creation, millionaire status is losing some of its luster, at least among wealthy Americans.

    According to an Edelman Financial Engines study conducted in December, very few people, even millionaires, consider themselves wealthy in the current economic climate.

    The firm surveyed more than 2,000 Americans, including an oversampling of affluent respondents, with household assets between $500,000 and $3 million, and found that less than one-third of millionaire respondents reported “feeling wealthy.”

    Fewer than half of all millionaires (44%) reported feeling “very comfortable” about their finances. Also, roughly four in 10 (41%) affluent respondents said they felt less “financially secure” than they hoped to be at their age.

    Most respondents (57%) said they would “feel wealthy” with $1 million in the bank, yet that wasn’t the case among the wealthy. Most affluent respondents (53%) said they would require over $3 million to feel the same, highlighting the gap in perception. What’s more – one-third (33%) of affluent respondents would need more than $5 million.

    Increasing Costs Means Less Buying Power

    Money is only as valuable as the goods and services it can buy. Recently, prices have been rising across many products and services, with the consumer price index surging to levels not seen in over four decades.

    With relentless inflation eating away at Americans’ bank accounts and a shaky stock market threatening their portfolios, many feel they need a lot bigger nest egg before they can comfortably retire.

    “Many of the higher net worth and affluent families I serve are generally aware of the ‘4% rule’ and understand that $1 million or even $3 million today is not worth what they thought it would be when they started saving 25 years ago due to the effects of inflation,” said David E. Barfield, CFP, Financial Planner at Datapoint Financial Planning.

    The ‘4% rule’ is popular among financial planners and suggests that retirees can safely withdraw 4% of their savings annually to cover the cost of living.

    “A couple earning $250K annually, for instance, may look at their $3 million portfolio and realize that it can only ‘safely’ sustain around $120K per year in retirement withdrawals based on the ‘4% rule’,” he adds.

    Matter of Perspective

    Yet, sometimes a number is just a number. Obtaining more money for the sake of it can be fueled by irrational psychology and hard to break.

    Many millionaires really do have enough money to support even an extravagant lifestyle, yet they still cannot step away from earning and saving more. It’s vital to focus on the correct metrics.

    “There is a behavioral component – many people who have diligently saved for 20-40 years have a strong habit. Trying to unwind that habit at a certain net worth number is extremely difficult,” says Ian Weiner, CFP and owner of Bespoke Wealth Solutions.

    To step off the hamster wheel, it’s vital to focus on the correct metrics.

    “The problem with setting a net worth goal is that it really focuses on the wrong thing,” Weiner adds. “You don’t live on a net worth, you live on the income that is created.”

    For others, it’s about who they compare themselves to.

    “We don’t feel financially secure because of what renowned psychologist Robert Cialdini calls, ‘Contrast mis-influence,'” says Jonathan Bird, CFP and financial advisor at Farnam Financial.

    “Our collective attention is pointed towards celebrities and social media influencers who are always portrayed with a higher standard of living than ourselves – private jets, expensive jewelry, etc,” he says.

    “There’s good news though – if you point your attention to the global population, you’ll start feeling rich. If you have income of $60,000 USD per year, you’re in the richest 1% of the global population.”

    A cursory glance at the ” How Rich Am I?” calculator can give you an idea of how you compare to the global average. For a look at how your net worth compares within your own country or others abroad, there is the World Inequality Database or the OECD’s Compare Your Income tool.

    Getting Advice

    At the end of the day, not knowing what to do with your fortune is a good problem to have. There are no more pennies to save, just lifestyle changes to make. Many financial advisors guide the wealthy to make the most of what they have.

    “One of the challenges I see regularly with my pre-retirement clients, especially those who have done a great job accumulating over the years, is in making the transition to decumulation,” says Barfield. “Taking money out of a portfolio one has spent decades building can be extremely difficult, even traumatic.

    “Developing an ongoing relationship with a financial advisor can help alleviate the stress of spending down assets and running out of money,” he added.

    For others, it’s about switching focus from money to time.

    “The most effective way to help clients stop moving the goalpost is to help them cherish their accomplishments,” said Cecil Staton, Founder of Arch Financial Planning.

    “In addition, they need to understand what risks they’re going to take by continuing to accumulate more wealth. Typically, this includes working longer, which uses more of our most scarce resource, time.”

    Others may need to look deeper and ask themselves what they really value.

    “Clients will often redefine what they want, and it’s part of my job to help them understand their values and make decisions based on those,” says Mike Hunsberger, ChFC, CFP, and Next Mission Financial Planning owner.

    “If they say they value spending time with their kids or grandkids but then are contemplating buying an expensive car that they’ll have to work additional hours to pay for, I want to have that discussion. Did what’s more important to them change?”

    Whether it be the changing economic reality at the macro level or the changes in lifestyle at the individual level, one thing is clear – being a millionaire is not a guaranteed solution to life’s financial well-being.

    To genuinely feel wealthy requires growth in our bank balance and the development of our mindset so that our priorities reflect our higher purpose and live our best lives.

    Net worth aside, only when we can spend our time and money the way we want with those we love can we live our best lives and experience true wealth.


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    4 Comments
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    Rose
    Rose
    1 year ago

    Chazal said it best, a person always wants double of what he has…

    Zelig
    Zelig
    1 year ago

    “Ezehu ashir, hasamaeach bichelko.”
    Who is wealthy. One who is joyous in their portion.

    ~Pirkei Avos

    Last edited 1 year ago by Zelig
    YITZCHOKLEVI
    YITZCHOKLEVI
    1 year ago

    I don’t need to “feel wealthy”. Just give me a million, if you have 4 million. Both of us will be happy.

    Wealthy
    Wealthy
    1 year ago

    $1Million wont get you very far these days. It costs at least $1Million to buy a house in many Jewish neighborhoods these days. Cost of living has gone up exorbitantly that you need an income of $400,000 just to stay afloat, without any extras.